Shares of Aurora Cannabis slid Friday because the Canadian grower’s results continue to disappoint analysts.
Aurora stock (ticker: ACB) slid 6.5% to $6.84 on Friday, while the S&P 500 index was up 1.3%. ETFMG Alternative Harvest (MJ), a cannabis exchange-traded fund, rose 2.3%.
The company late Thursday reported a net loss of 164.7 million Canadian dollars (US$136.1 million), or 85 Canadian cents a share for its fiscal third quarter. That is wider than the loss of 25 Canadian cents a share that Wall Street had anticipated. Sales of C$55.2 million came in well short of estimates at C$68.7 million.
Even on an adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, basis, the company still lost C$24 million. Aurora had targeted positive adjusted Ebitda for years, a mark it repeatedly failed to hit.
“We don’t see a cost-cutting or growth path that gets to near-term positive Ebitda, despite Company commentary to the contrary,” MKM Partners analyst Bill Kirk wrote in a note Friday.
Kirk maintained a Sell rating and cut his price target to C$6 from C$9. Kirk called the results “very concerning.” He noted that consumer cannabis net revenue of C$18 million was down 37% from the fiscal second quarter—its lowest level since the quarter when legal cannabis sales first launched in Canada back in 2018.
Aurora also said it intends to file for a new US$300 million at-the-market stock sale program. The company said the program would “provide maximum flexibility to pursue select acquisitions going forward, including within the U.S.”
“With limited success in Canada, Aurora has no right to win outside its home market,” Kirk wrote. “We don’t think Canadian grown product can compete internationally, nor do we expect a Canadian [licensed producer] LP (regardless of possible regulatory changes) to be a leader in the U.S.” LP refers to licensed cannabis producers in Canada.
BMO Capital Markets analyst Tamy Chen raised her rating on the stock to Market Perform from Underperform, but cut her price target to C$8 from C$9. She notes the company’s strategy to shift more toward premium offerings is taking longer than expected. She argued such struggles weren’t surprising, given data from HiFyre that showed Aurora’s products losing market share.
Cantor Fitzgerald analyst Pablo Zuanic cut his price target to C$9 from C$11.25 but maintained a Neutral rating in a note Friday morning. The company’s cash burn, ongoing negative adjusted Ebitda, and market share erosion justify the stock’s recent stumbles, he writes. That said, the analyst does note Aurora is still the leader in domestic medical cannabis, and one of the largest exporters of Canadian cannabis.
“Certainly, the company has greater international optionality than the Canadian LP average, in our view,” Zuanic wrote. “We also think ACB should be enticing to eventual non-cannabis companies trying to enter the sector (CPG, pharma) and even to other cannabis companies with the funding power.”
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